GameStop 2014 Annual Report Download - page 26

Simply Mac has grown from 8stores in the fall of 2012, when we acquired 49.9% of the company,to60stores as of the
end of fiscal 2014. We completed the acquisition of the remaining ownership in Simply Mac in November 2013. Simply
Mac’s primary focus for store expansions is in U.S. markets which generally do not have the size and demographics to
make them attractive for an Apple-owned store. We intend to continue to open new Simply Mac stores in fiscal 2015 and
the coming years.
In connection with the continued expansion of our Technology Brands business, Spring Mobile and Simply Mac completed
acquisitions of several additional AT &T resellers and authorized Apple retailers, respectively,infiscal 2014. We continue
to seek out opportunities to extend core competencies to other products and retail categories in order to continue to grow
and to help mitigate the financial impact from the cyclical nature of the video game console cycle.
•Successfully Executing our StoreOpening/Closing Strategy. We have an analysis-driven approach to store opening and
closing decisions. We intend to continue to open alimited number of new VideoGame Brands stores in targeted markets
where we can take market share from uncontested competitors, as well as in markets in which we already operate where
we have realized returns on invested capital that have exceeded our internal targets. We analyze each market relative to
target population and other demographic indices, real estate availability,competitive factors and past operating history,if
available. On average, our new stores opened in the past three fiscal years have had areturn of original investment of less
than two years. We areaggressive in the analysis of our existing store base to determine optimal levels of profitability and
close stores where profitability goals are not being met or where we can attempt to transfer sales to other nearby existing
stores and increase overall profits. We utilize our PowerUp Rewards loyalty program information to determine areas that
are currently underserved and also utilize our database to ensure ahighcustomer transfer rate from closing locations to
existing locations. We opened 49 new VideoGame Brands stores and closed 300 VideoGame Brands stores in fiscal 2014,
reducing our VideoGame Brands store count by 3.9%, in excess of stated targets as we exited Spain and sold or closed
108 stores. We opened 109 new VideoGame Brands stores and closed 254 VideoGame Brands stores in the 52 weeks
ended February 1, 2014 ("fiscal 2013"), reducing our VideoGame Brands store count by 2.2%, in line with stated targets.
We plan to open approximately 50 new VideoGame Brands stores and close approximately 200-300 VideoGame Brands
stores worldwide in fiscal 2015.
Expand our Pre-Owned Business
We believe we are the largest retailer of pre-owned video game products in the world and carry the broadest selection of pre-
owned and value video game products for both current and previous generation platforms, giving us auniqueadvantage in the
video game retail industry.The opportunity to trade-in and purchase pre-owned and value video game products offers our customers
aunique value proposition generally unavailable at most mass merchants, toy stores and consumer electronics retailers. We obtain
most of our pre-owned video game products from trade-ins made in our stores by our customers. We also obtainvalue-priced, or
close-out, video game products at favorable prices from publishers, other retailers or distributors and can sell those products to
value-conscious consumers in our stores. Pre-owned and value video game products generate significantly higher gross margins
than new video game products.
Our primary objectives in our pre-owned and value business are to continue to expand our product assortment to drive sales
and gross profit growth and to gain market share in the value channel. Our strategy consists of increasing consumer awareness of
the benefits of trading in and buying pre-owned video game products and value-priced video game products at our stores through
increased marketing activities and the use of both broad and targeted marketing to our loyalty program members. The supply of
value-priced video game products and trade-ins of video game products, and the demand for resale of these products, is affected
by overall demand for video game products and the introduction of new software and hardware by our suppliers. We expect the
continued adoption of next-generation consoles and software to drive close-out availability and trade-ins of older video game
products, thereby expanding our supply of pre-owned and value video game products.
Own the Customer
Sustaining and growing our existing customer base is dependent upon our ability to increase GameStop brand awareness, to
drive membership in our loyalty programs, to engage with customers through social media and our mobile apps, and to expand
our market leadership position by offering avariety of new and pre-owned video game products and continuing to enhance our
mobileand digital product and service offerings.
Substantially all of GameStop’s U.S. and European video game stores are operated under the GameStop name, with the
exception of the Micromania stores in France. Our Canadian and Australian video game stores operate under the EB Games name.
We operate loyalty programs in each of the countries in which we operate our VideoGame Brands stores. The Micromania stores
introduced aloyalty program in the 1990s. Using this program as amodel,weintroducedour U.S. loyalty program called PowerUp
RewardsTM ("PowerUp Rewards") in 2010. We introduced other loyalty programs in our video game stores in remaining countries
between 2011and 2014. Building our brands has enabled us to leverage the increased awareness to capture advertising and
marketing efficiencies. Our loyalty programs generally offer our customers the ability to sign up for afree or paid membership
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